Asian Regionalism: How does it compare with Europe?

Posted by on 12 April 2009

On 2 April 2009, six Asian leaders attended the London meeting of the Group of Twenty (G20). They were actually seven, if one agrees to consider Australia as part of Asia. The Association of Southeast Asian Nations (ASEAN) Chair was part of the group. This was the first occasion for ASEAN to receive proper international recognition in such a high profile global forum (Table 1). Was Asia presenting a united front to offer a regional approach in solving the ongoing global crisis?

 
There was no common Asian front shown in London. To be sure, also the European Union (EU)1 was unable to offer a unified view on policy priorities to weather the storm. While regional cooperation has proven effective in the past to tackle regional crises both in Asia and Europe, is regionalism a viable solution, between national policies and global discussions, to solve global crises?
 
The answer is—or should be—a qualified yes: as long as regional groupings can help to form a consensus among their members. But is this really the case? Where does Asian regionalism stand compared with Europe? Is there in Asia a counterpart to the EU? A review of the different approaches followed in Asia and Europe for regional cooperation and integration can help analyze these issues and the challenges Asian regionalism is facing.
 
Models of Regionalism
A common thread runs through the turbulent histories of Asia and Europe: the immense dynamism and impressive discoveries of their great civilizations have often been directed towards destruction and death. Fortunately, their collective energies are now channeled more constructively—not least into closer regional cooperation that entrenches peace and enhances prosperity.
 
Regionalism has progressed much further in Europe than in Asia. The devastation wreaked by two world wars convinced Europeans of the importance of working together to bind their economies and societies together. They realized that by pooling their sovereignty with their neighbors in certain areas they could achieve more than by acting alone. By drafting common rules, promoting close coordination among national authorities, and developing strong regional institutions that advance economic integration, the EU has generated huge economic gains and sharply narrowed the income gap among member countries. EU governments also cooperate closely in foreign and security policy, as well as in justice and home affairs.
 
The milestones in Europe’s economic integration are the creation of a customs union, followed by a single market, and then a common currency. Very broadly speaking, after adopting a common trade policy, European countries agreed to the free movement of goods, labor and services, then progressively liberalized their capital accounts, and more closely coordinated their monetary and exchange-rate policies before introducing the euro in 1999. Thus the integration of production and trade preceded—and was a precondition for—financial and monetary integration.
 
The EU now has an extensive institutional structure and a large regional bureaucracy centered in Brussels, its administrative capital. The European Commission, Council of Ministers, Court of Justice, Parliament and other EU institutions employ more than 60,000 eurocrats, while EU governments’ very large permanent delegations in Brussels act as strategically important extensions of national ministries and agencies.
 
Regionalism in Asia has developed rather differently. Regional integration has been driven more by markets than by governments. Cooperation among national authorities is more recent and less intimate. It remains focused on economic issues (with some social components) and light on formal institutions. For now, it involves no political ambitions, although ASEAN has an advanced security dialogue with several Asian and non-Asian partners.
 
Asia’s pragmatic and flexible approach to regionalism is partly dictated by history. Asian countries have little inclination to compromise their independence by pooling sovereignty with their neighbors, not least because several of the modern Asian nations emerged from colonialism only recently and need first to build their national identities. Disparities in economic development, social structures, and political systems are also much greater in Asia than Europe.
 
Asia’s economic integration has been largely driven by the development of increasingly sophisticated production networks that span the region and enable companies to benefit from each country’s comparative advantages, through an articulated regional division of labor. As industries were transferred from more to less advanced countries, production of manufactured goods has been fragmented across the region. This, in turn, has generated a huge expansion of intraregional trade in parts and components. But since Asia’s exports of final goods mostly go to the United States and Europe, closer regional connections have gone hand in hand with greater global ties.
 
The catalyst for the recent enhancement of regional cooperation in Asia was the 1997/8 financial crisis. This created a greater awareness of the region’s shared interests and vulnerabilities. In particular, it created a greater need for financial cooperation— prompting the establishment of the ASEAN+3 Finance Ministers’ Process and several related structures such as the Chiang Mai Initiative and the Asian Bond Markets Initiative—at an earlier stage of integration than in Europe. The emergence of Asian regionalism during the last decade also reflected the disappointment with the way the International Monetary Fund handled the 1997/98 crisis.
 
Asia does not yet have a single market in goods and services, although bilateral and subregional trade agreements have multiplied in recent years. This is in part driven by the stalling of the World Trade Organization’s Doha Round, but also by the proliferation of preferential trade agreements around the world. Even so, Asia’s regionalism remains outward-oriented—focused on supporting market relationships rather than supplanting them and on sustaining its openness to global markets.
 
Asia lacks strong regional institutions and a bureaucratic body to serve the region. Unlike in Europe, regional treaties tend to be short and focused on codifying informal interactions among members rather than introducing a complex set of binding rules, and related sanctions. Asia’s few regional institutions are small and lean, with a limited mandate from national authorities to manage external shocks, internalize regional spillovers, and provide effective regional public goods. Whereas European regionalism is dominated by the EU, Asian regionalism is based on many overlapping subregional organizations that cooperate to varying degrees in different areas and provide a solid backbone to connect markets and people.
 
Admission criteria in the EU are quite clear—democracy, a market economy, and the transposition into national law of EU laws and regulations (the acquis communautaire). Compliance to these rules can be checked and monitored in a fairly objective way by all existing EU member states. In the case of Asian regional bodies, however, it is difficult to identify an unambiguous set of rules governing the issue of membership, as they are generally based on ad hocdecisions by political leaders.
 
Important regional players such as the People's Republic of China (PRC), India, and Japan have yet to start a concrete dialogue on formulating a vision, shared goals and roadmap for regional cooperation in Asia. But the creation of the East Asia Summit (EAS) in 2005—which brings together the 10 members of ASEAN, plus the PRC, Japan, and the Republic of Korea (which together make up ASEAN+3), as well as Australia, India, and New Zealand—could eventually provide a forum for such an impetus. While the EAS has no plans for now to create an “Asian Commission and emerge as the Asian counterpart to the EU, EAS members of G20 can form a united Asian front to face the global crisis. And if EAS membership is too wide, ASEAN+3 or ASEAN can play a pivotal role to facilitate the articulation of the Asian voice.
 
Facing the future
Europe and Asia both face the huge challenge of articulating a response to the ongoing economic crisis. Although its ultimate impact on regional cooperation and integration is still unclear, it could give a new impetus to Asian regionalism, as the 1997/8 crisis did. In fact, history shows that major steps to enhance regionalism are usually taken as a reaction to shocks—while the Second World War prompted the creation of the European Coal and Steel Community in 1951, the ASEAN+3 Finance Ministers Meeting was established in response to the crisis of 1997/98. And while a global crisis requires a global response, closer regional cooperation can be useful to enhance the effectiveness of global action. For instance, European countries need to harmonize their approaches to financial regulation and supervision, while Asian ones should start a dialogue in areas such as exchange rates and fiscal policy that they have neglected up to now. In so doing, both Asian and European regionalism can provide a stepping stone to solve the global crisis.
 
The two regions can also learn from each other. Europe would do well to emulate the flexibility of Asia’s production structures and labor markets, its emphasis on investment in productivity-enhancing research and development (R&D), and its concept of open regionalism, which minimizes discrimination against non-members.
 
Asia could adopt some of the EU’s governance principles. These include: (i) deciding some issues by qualified majority voting and others by consensus; (ii) giving additional weight to small countries and minorities in decision-making, so as to make regionalism more inclusive; (iii) the “subsidiarity” principle, whereby decisions are taken at the lowest sensible level of government; (iv) the open method of coordination, which allows member countries to agree on initiatives for intergovernmental cooperation without legal constraints; and (v) mutual surveillance through peer review and peer pressure, to ensure that members respect commitments before resorting to sanctions.
 
Asia could also take inspiration from Europe’s pro-activeness in creating common institutions. Although trying to establish strong regional institutions that involve the pooling of members' national sovereignty would be premature, much could be done to enhance Asia's institutional capabilities for economic cooperation. As the ongoing crisis is reshaping the global financial architecture, enhancing Asia's economic dialogue and cooperation is an important step to shape and raise its profile in global institutions.
 
The EU is often presented as theintegration model for other regional groupings, in Asia and elsewhere. But while regions can learn from others’ experiences, their needs and circumstances vary. Asia must find its own path to greater cooperation and integration. This requires visionaries, people with great ideas who—as Jean Monnet, Robert Schumann, and Altiero Spinelli did in Europe—can influence opinion makers, inspire national leaders, and eventually enable the region to speak with a more prominent common voice in global forums.
 

Giovanni Capannelli,
Asian Development Bank’s Office of Regional Economic Integration

 

 
Table 1 - Asian and European representatives attending the G20 London Summit
Country / Group
Representative, Title
Membership
APEC
ASEAN
ASEAN+3
ASEM
EAS
EU
ASEAN
Abhisit Vejjajiva, Chair (*)
 
 
 
 
 
 
Australia
Kevin Rudd, Prime Minister
 
 
 
 
 
 
China, People's Rep. of
Hu Jintao, President
 
 
 
 
 
 
European Commission
Manuel Barroso, President
 
 
 
 
 
 
European Council
Mirek Topolanek, President (**)
 
 
 
 
 
 
France
Nicolas Sarkozy, President
 
 
 
 
 
 
Germany
Angela Merkel, Chancellor
 
 
 
 
 
 
India
Manmohan Singh, Prime Minister
 
 
 
 
 
 
Indonesia
Susilo Bambang Yudhoyono, President
 
 
 
 
 
 
Italy
Sivlio Berlusconi, Prime Minister
 
 
 
 
 
 
Japan
Taro Aso, Prime Minister
 
 
 
 
 
 
Korea, Republic of
Myung-Bak Lee, President
 
 
 
 
 
 
Netherlands (***)
Jan Meter Balkenende, Prime Minister
 
 
 
 
 
 
Spain (***)
Jose L. R.Zapatero, Prime Minister
 
 
 
 
 
 
United Kingdom
Gordon Brown, Prime Minister
 
 
 
 
 
 
APEC = Asia-Pacific Economic Cooperation.
ASEAN = Association of Southeast Asian Nations. It includes Brunei Darussalam, Cambodia, Lao PDR, Indonesia, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam.
ASEAN+3 includes the 10 ASEAN members plus the People's Republic of China, Japan, and the Republic of Korea.
ASEM = Asia-Europe Meeting.
EAS = East Asia Summit. It includes ASEAN+3 members plus Australia, India, and New Zealand.
EU = European Union. It includes Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Rumania, Spain, Slovak Republic, Slovenia, Sweden, and United Kingdom.
(*) Abhisit Vejjajiva is the Prime Minister of Thailand. He was invited to the G20 London Summit in his capacity as Chair of ASEAN.
(**) Mirek Topolanek is the Prime Minister of the Czech Republic. He was invited to the G20 London Summit in his capacity as President of the European Council.
(***) The country is not a recognized G20 member.
 
 
1 The EU was represented at the London Summit of G20 by its Commission and Council of Ministers, as well as six EU member countries, although two them—the Netherlands and Spain—are not official G20 members (Table1).